Promised income tax cuts could be SCRAPPED in the Budget to fund a climbdown on Universal Credit – amid claims charities working on the policy are banned from criticising ministers

Theresa May faces mounting pressure to scrap roll out of the welfare change

Claims Chancellor could scrap tax cuts to pay for overhaul of Universal Credit

Contracts for firms said to include clauses barring criticism of Cabinet ministers

Sir John Major said the benefit changes could be as unpopular as the poll tax

Promised income tax cuts could be scrapped in the Budget to fund a climbdown on Universal Credit, it was claimed today.

The Chancellor could shelve plans to increase personal allowance thresholds as the government scrambles to salvage the flagship policy.

The drastic move is being considered amid a wave of condemnation of the way the shake-up – which merges a range of benefits into one – is being handled.

Work and Pensions Secretary Esther McVey appeared to contradict Theresa May when she admitted yesterday that some people will be worse off when the changes are rolled out next year.

Meanwhile, it has emerged that charities working on the scheme have been made to sign clauses stating they will not criticise ministers.

Philip Hammond could go back on income tax cuts to pay for Universal Credit climbdown

Esther McVey (pictured in Downing Street on her way to Cabinet on Tuesday) admitted that some people will be worse off when the government’s under-fire Universal Credit welfare reforms are rolled out next year

Last year’s Tory manifesto pledged to increase the level at which workers start paying income tax from £11,800 to £12,500 by 2020.

The higher rate income tax threshold was supposed to rise from £46,351 to £50,000 over the same period.

But the Budget on October 29 could see the promise abandoned to put more money into universal credit, according to the Daily Telegraph.

A Treasury spokesman said the story was speculation.

In a round of interviews at an IMF conference in Bali, Mr Hammond said he had no plans to change the fundamentals of UC but suggested he could ease the transition.

He also repeated his warning that some tax rises would be needed to pay for ‘big spending commitments’ on the NHS and housebuilding.

In a fresh sign that pension tax reliefs could be curbed, Mr Hammond said the relief was ‘eye-wateringly expensive’.

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Universal Credit combines six benefits into one monthly payment. It is designed to make the welfare system less complicated and ensure that no-one faces a situation where they would be better off claiming benefits than working.

But according to reports, millions of families could be left up to £200 a month worse off.

Sir John Major warned yesterday that universal credit could hurt Mrs May in the same way as the poll tax damaged Margaret Thatcher in 1989.

In an interview, Mrs McVey said the reforms made it easier for people to get back into work, but admitted some people could be worse off. She added: ‘As somebody who knows more about Universal Credit than John Major, I will tell you what universal credit is doing – for the vast majority of people, it is working much better than the old system.’

A Government spokesman said last night: ‘Universal Credit is based on the sound principles that work should always pay and those who need support receive it. We are listening to concerns about achieving these principles.’

Meanwhile, it has been claimed that at least 22 organisations with contracts worth £1.8billion have been required to sign the clauses as part of their involvement with programmes getting the unemployed into work.

The firms involved with the Universal Credit (UC) shakeup are said to have to undertake to ‘pay the utmost regard to the standing and reputation’ of the Work and Pensions Secretary.

Theresa May (pictured at an event to mark the anniversary of the government’s race audit) is facing a Tory revolt over the Universal Credit programme

They must ‘not do anything which may attract adverse publicity’ to her, damage her reputation, or harm the public’s confidence in her, according to the Times

Officials at the Department for Work and Pensions (DWP) denied they were ‘gagging clauses’ intended to prevent criticism of ministers or their policies, insisting they were just ‘standard procedure’.

However a spokesman confirmed that the contracts did include references to ensure both parties ‘understand how to interact with each other and protect their best interests’.